Other General Fund Revenue

Other General Fund Revenue

All Other Revenue Highway Patrol Fines Nursing Facilities Fee

Public Institution Reimbursements Tobacco Settlement

Legislative Fiscal Division Revenue Estimate Profile

All Other Revenue

Legislative Fiscal Division 273 December 2008 Revised Revenue Estimates

All Other Revenue

Revenue Description: There are a number of other taxes, fees, and fines that historically have generated less than $2.5 million each in annual general fund revenue. In addition, the statutes governing these miscellaneous taxes, fees, and fines are frequently changed, making meaningful comparison between tax years impractical and accurate estimation of the revenue difficult. “All Other Revenue” sources are estimated in aggregate except for the following: court automation surcharge (enacted by the 2005 legislature in House Bill 536), investment license transfers, liquor license fee transfers, civil fines, lodging facility use tax, Montana University System debt service deposits, deposits by state agencies for SWCAP/ SFCAP, district court fees, BOI reimbursement of State Street Banking fees, transfers of excess coal tax revenue in the shared account, bentonite tax enacted in SB 276 by the 2005 legislature, excess balances in the captive insurance and the procurement accounts, and transfers of the excess over $2.0 million from the veterans’ cigarette tax account administered by DPHHS. In the past, general fund wildfire costs incurred on federal jurisdiction fires and reimbursed by the federal government had been included in this revenue source, but beginning in fiscal 2003 they are deposited to the federal special revenue fund. A one-time revenue adjustment of $4.0 million was added in fiscal 2009 for State Auditor security fines. Montana was part of the investigation of 15 large broker-dealer firms for fraudulent and unsuitable recommendation of auction rate securities. Ten of these firms have agreed to settlements in principal. The State Auditor’s Offices expects the fines to be paid by the end of FY 2009.

Statutory Reference: Various

Applicable Tax Rate(s): Various

Distribution: “All Other Revenue” is deposited in the general fund. Distribution Chart:

General Fund

100%

Collection Frequency: The various revenue sources are generally collected on a monthly basis.

% of Total General Fund Revenue: FY 2004 - 2.19% FY 2007 - 1.04% FY 2005 - 2.27% FY 2008 - 1.96% FY 2006 - 1.87%

Revenue Estimate Methodology: There are numerous smaller sources of revenue deposited to the general fund that are treated as a single source termed “All Other”. Fifteen of these revenue sources are estimated individually with the remainder estimated as a group. Data Numerous data sources are consulted for each of the applicable 15 revenue sources that are estimated individually. Analysis

1. Largest Revenue Sources (see the figure below)


All Other Revenue


a. The remainder of “All Other” revenue, after the 15 revenue sources have been estimated individually, is estimated by continuing the amount received in FY 2008 for FY 2009-FY 2011.

b. Abandoned Property – The amount collected in FY 2008 is used for the estimates for FY 2009-FY 2011. c. District Court Fees – The previous year’s amount is increased by the growth rate between the prior two years. d. Investment License Fee Transfer – The transfer amount is the net between non-general fund investment fee

revenue collected by the State Auditor and its expenses. These amounts are determined in the “Investment License Fee” revenue source.

e. OTO - In the September 2007 special session the legislature enacted HB 3 that created a fire suppression state special revenue account and transferred $40.0 million general fund into it to pay fire suppression costs. HB 3 terminates June 30, 2009. It is estimated that there will be a balance of $32.915 million in the fund at the end of FY 2009. Section 17-1-504, MCA, requires that all assets, liabilities, and fund balance of an account terminated by the legislature accrues to the general fund. Therefore, $32.915 million is contained in this revenue source for FY 2009.

Largest Revenue Sources

$0

$5

$10

$15

$20

$25

$30

$35

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F 2011FFiscal Year

Mill

ions

Remainder Abandoned PropertyDistrict Court Investment TransferOTO

2. Large Revenue Sources (see the figure below) a. Statewide Cost Allocation Plan – Amounts budgeted for agencies in HB 2 for the SWCAP are used for the amounts

from this source. b. Court Surcharge – The previous year’s amount is increased by the growth rate between the prior two years. c. Veteran’s Cigarette Account Transfer – Money in the account at the end of a fiscal year in excess of $2.0 million is

transferred to the general fund. To estimate the excess amounts, distributions of cigarette tax revenue to the account (as determined in the “Cigarette Tax” revenue source) is reduced by budgeted present law amounts from the account for each fiscal year obtained from MBARS. Included are expenditure estimates from long range building appropriations. The $2.0 million limit is then subtracted from the net revenue.

Large Revenue Sources

($5.0)($4.0)($3.0)($2.0)($1.0)$0.0$1.0$2.0$3.0$4.0$5.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F 2011F

Fiscal Year

Mill

ions

SW CAP/ Court Surcharge DOT SSRS Vets. Transfer

3. Smaller Revenue Sources (see the figure below) a. Banking Charges – The rate the Board of Investments charges funds for its services is determined by a contract with


All Other Revenue


a financial institution. Board personnel state that the current contract is $1,500,000, but may be more if additional accounts are established. The current contract amount was used.

b. Montana University System Refunding – Payments are determined by a loan repayment schedule calculated by the Department of Administration. The loan will be paid off by FY 2011.

c. Civil Fines – The amount collected in FY 2008 is carried forward for FY 2009-FY2011. The FY 2009 amount is increased by $4.0 million of security settlement revenue anticipated by the State Auditor’s Office.

d. Liquor License Fee Transfer – Money collected from liquor license fees, net of operating costs of the Department of Revenue and Department of Justice, is transferred to the general fund. License fee revenue and operating costs (obtained from MBARS budgets) are estimated and shown in the “Liquor Profits” revenue source.

Smaller Revenue Sources

$0.0$0.5$1.0$1.5$2.0$2.5$3.0$3.5$4.0$4.5$5.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F 2011FFiscal Year

Mill

ions

Bank Charges MUS Refunding Civil Fines Liquor Transfer

4. Smallest Revenue Sources (see the figure below) a. Coal Shared Account, Captive Insurance Account, and Procurement Account Transfers – Any excess fund balance

in the accounts are transferred to the general fund. To estimate the excess amounts, distributions of coal severance tax revenue to the account (as determined in the “Coal Severance Tax” revenue source) and revenues estimated by the Governor’s budget office are reduced by budgeted present law amounts for each fiscal year from the account obtained from MBARS.

b. Bentonite Tax – The amount collected in FY 2008 is carried forward for FY 2009-FY2011. c. State Employees Lodging Facility Use Tax – Revenue from this tax paid by state employees is returned to the funds

from which they were paid, including the general fund. The general fund estimate is calculated by multiplying the estimate for non-general fund (estimated in the “Lodging Taxes” revenue source) by the ratio of the previous lodging facility use tax general fund portion to the total non-general fund portion.

Smallest Revenue Sources

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F 2011FFiscal Year

Mill

ions

Coal Transfer Bentonite TaxState Emp. Bed Tax Procurement Acct.

Adjustments and Distribution Once total revenue for each fiscal year is determined 100 percent of the revenue is distributed to the general fund.


All Other Revenue


Forecast Methodology

Annual Growth Rate in All Other

Collections not Previously Defined

Investment License Transfer

All Other Revenue

+

+

x Adjusted Actual Fiscal Year Collections

+ Civil Fines

+ Legislation Impacts

University Debt Service

State Street Bank Fee

Reimbursement+ Coal Tax Shared

Account TransferDistrict Court

Fees +

Liquor License Fee Transfer

+State Employees Lodging Facility Use Tax Paid by the General Fund

+ Cigarette Tax Account Transfer SWCAP/SFCAP+

+

+Bentonite Tax

Abandoned Property

Court Automation Surcharge

+

+

Procurement Account Excess

Balance

Captive Insurance Account Excess

Balance + +

One-time Transfers +

Revenue Estimate Assumptions

Vet. Account One-Timet Total Tax GF Tax Base Annual Adjustments Transfer Transfer

Fiscal Millions Millions Millions Growth Millions Millions Millions

Actual 2000 20.488330 20.488330 7.125477 -35.0763%Actual 2001 51.821783 51.821783 9.260235 29.9595%Actual 2002 43.215892 43.215892 6.401065 -30.8758% 1.162288Actual 2003 42.440179 42.440179 7.119579 11.2249% 21.282497Actual 2004 30.241562 30.241562 6.201217 -12.8991% 8.189612 1.054958Actual 2005 34.724084 34.724084 6.434436 3.7609% 0.000000 2.893230 4.767070Actual 2006 31.867090 31.867090 7.114255 10.5653% 0.000000 2.652808 0.781063Actual 2007 19.090874 19.090874 7.520019 5.7035% 0.000000 -4.115855 0.000000Actual 2008 38.433555 38.433555 7.493960 -0.3465% 0.000000 2.636252 7.821451

Forecast 2009 65.749000 65.749000 7.493960 0.0000% 0.000000 1.323250 32.915000Forecast 2010 32.816000 32.816000 7.493960 0.0000% 0.000000 3.754095 0.000000Forecast 2011 33.575000 33.575000 7.493960 0.0000% 0.000000 3.995628 0.000000


All Other Revenue


Investment MSU&EMC SABHRS

t Transfer Land Grant Civil Fines GVW Fees Accom. Tax Debt DebtFiscal Millions Millions Millions Millions Millions Millions Millions

Actual 2000 2.296258 0.086129 0.439498 1.275935 0.016878 0.495693 2.506520Actual 2001 2.445000 0.091699 0.484739 1.252221 0.052215 0.837170 2.490067Actual 2002 2.179165 0.000000 0.749382 1.044512 0.038912 0.839583 2.468857Actual 2003 2.036200 0.000000 0.480945 1.071278 0.032547 0.838186 2.050913Actual 2004 2.113000 0.000000 0.855870 1.067278 0.040021 0.837743 0.000000Actual 2005 2.110000 0.000000 0.442752 1.100125 0.048903 0.833016 0.000000Actual 2006 2.234000 0.000000 1.238230 1.304052 0.061096 0.831704 0.000000Actual 2007 2.977013 0.000000 0.872801 0.078732 0.071144 0.251949 0.000000Actual 2008 3.309251 0.000000 0.761666 -0.034714 0.080180 0.694164 0.000000

Forecast 2009 3.003000 0.000000 4.761666 0.000000 0.081000 0.697341 0.000000Forecast 2010 3.011000 0.000000 0.761666 0.000000 0.084000 0.466249 0.000000Forecast 2011 3.488000 0.000000 0.761666 0.000000 0.088000 0.000000 0.000000

Coal SFCAP Liquor License District Bankt FEMA Transfer SWCAP Transfer Court Charges

Fiscal Millions Millions Millions Millions Millions Millions

Actual 2000 0.000000 0.000000 2.486250 0.000000 0.000000 0.000000Actual 2001 31.097802 0.611432 0.949777 0.000000 0.000000 0.000000Actual 2002 23.246341 0.623227 1.023875 1.036184 0.000000 0.777640Actual 2003 0.000000 0.000000 1.179279 0.558198 2.664891 0.771108Actual 2004 0.145792 0.000000 2.214579 0.734102 2.839310 0.766000Actual 2005 5.540426 0.684019 2.514237 0.431146 3.009058 0.736556Actual 2006 3.535414 0.550453 1.844039 0.305976 3.107784 0.902735Actual 2007 0.302060 0.536230 1.722981 0.436316 3.134942 0.866971Actual 2008 0.088273 0.000000 2.399295 1.407218 3.349474 1.334035

Forecast 2009 0.000000 0.607935 2.785109 1.190645 3.578687 1.500000Forecast 2010 0.000000 0.385847 4.034066 1.265316 3.823586 1.500000Forecast 2011 0.000000 0.000000 4.235768 1.262636 4.085244 1.500000

Abandoned Court Captive Procurementt Property Surcharge Bentonite Account Account

Fiscal Millions Millions Millions Millions Millions

Actual 2000Actual 2001Actual 2002Actual 2003Actual 2004Actual 2005Actual 2006 3.310185 1.589184 0.504112Actual 2007 2.358695 1.659546 0.417330Actual 2008 4.253455 1.615904 0.563727 0.023101

Forecast 2009 3.256705 1.573410 0.563727 0.007833 0.409333Forecast 2010 3.256705 1.532033 0.563727 0.071850 0.811341Forecast 2011 3.256705 1.491744 0.563727 0.124268 1.227121

Total Rev. = Base * (1+ Annual Growth) + Vet. Account Transfer + Investment Transfer + Civil Fines +GVW Fees + Accom. Tax + MSU/EMC Debt + Coal Transfer + SFCAP/SWCAP +Liquor License Transfer + District Court + Bank Charges + Court Automation +Abandoned Property + Bentonite + Captive Account + Procurement Account

Total Rev. = GF Rev.


All Other Revenue


Revenue Projection:

Data Source(s): SABHRS, Office of Budget and Program Planning, Department of Justice, Department of Public Health and Human Services, Department of Administration, Department of Revenue, and the State Auditor

Contacts: Multiple state agencies

Total General Fund GFFiscal Collections Collections PercentYear Millions Millions Change

A 1987 15.768806 15.768806 Not App.A 1988 15.558294 15.558294 -1.33%A 1989 15.834736 15.834736 1.78%A 1990 14.097344 14.097344 -10.97%A 1991 13.741633 13.741633 -2.52%A 1992 15.466237 15.466237 12.55%A 1993 17.993470 17.993470 16.34%A 1994 14.105385 14.105385 -21.61%A 1995 20.217103 20.217103 43.33%A 1996 14.000938 14.000938 -30.75%A 1997 15.822433 15.822433 13.01%A 1998 25.427788 25.427788 60.71%A 1999 34.096246 34.096246 34.09%A 2000 20.488330 20.488330 -39.91%A 2001 51.821783 51.821783 152.93%A 2002 43.215892 43.215892 -16.61%A 2003 42.440179 42.440179 -1.79%A 2004 30.241562 30.241562 -28.74%A 2005 34.724084 34.724084 14.82%A 2006 31.867090 31.867090 -8.23%A 2007 19.090874 19.090874 -40.09%A 2008 38.433555 38.433555 101.32%F 2009 65.749000 65.749000 71.07%F 2010 32.816000 32.816000 -50.09%F 2011 33.575000 33.575000 2.31%

All Other Revenue

0

10

20

30

40

50

60

70

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Fiscal Year

Mill

ions

of D

olla

rs

Total General Fund

Legislative Fiscal Division Revenue Estimate Profile Highway Patrol Fines


Highway Patrol Fines

Revenue Description: The Montana Highway Patrol issues citations for speeding, driving under the influence of alcohol or drugs, and other misdemeanors. The fines and forfeitures associated with these citations are collected by various state and local courts.

Statutory Reference: Tax Rate (MCA) – general fines (61-3-601, 61-5-307, 61-7-118, 61-8-711, 61-9-511), multiple others

Tax Distribution (MCA) – 3-10-601 (fines collected in justice court are included in “All Other General Fund”), 61-10-148 (violations of vehicle size, weight & load), 61-12-701 (fines by Highway Patrol)

Date Due – upon conviction

Applicable Tax Rate(s): Fines for citations are variable.

Distribution: All of Highway Patrol fines and forfeitures on all offenses that result from citations issued by the Highway Patrol, except those paid to a justices’ court, and received by the state are deposited in the general fund. Distribution Chart:

General Fund

100%

Collection Frequency: Monthly

% of Total General Fund Revenue: FY 2004 – 0.30% FY 2007 – 0.23% FY 2005 – 0.28% FY 2008 – 0.21% FY 2006 – 0.25%

Revenue Estimate Methodology: The estimate for the highway patrol fine revenue is derived by estimating a growth rate for each of the fiscal years for the 3-year period in question. Data Data from the statewide accounting system (SABHRS) provide a history of highway patrol fine revenue. Analysis The estimate for highway patrol fines is derived by multiplying the revenue amount from the last known fiscal year and all subsequent years by a growth factor. The growth factor is the average annual growth between FY 2000 and FY 2008. Legislation impacts, if any, are added.



Change in Highway Patrol Fines

-5%-3%-1%1%3%5%7%9%

11%13%15%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

F20

10F

2011

F

Fiscal Year

Growth Rate

Adjustments and Distribution Once total tax revenue for each fiscal year is determined, the applicable distribution percentage, 100 percent to the general fund, is applied.

Forecast Methodology All Highway Patrol Fines

RevenuexGrowth Rate

Most Recent Completed Fiscal Year Collections

+ Legislation Impacts

Average Annual Growth FY 2000 – FY 2008

Revenue Estimate Assumptions:

t Total Tax GF Tax FineFiscal Millions Millions Growth Rate

Actual 2000 4.027557 4.027557 0.071580Actual 2001 3.980688 3.980688 -0.011637Actual 2002 4.061733 4.061733 0.020360Actual 2003 4.109703 4.109703 0.011810Actual 2004 4.084340 4.084340 -0.006171Actual 2005 4.292730 4.292730 0.051022Actual 2006 4.316381 4.316381 0.005510Actual 2007 4.155144 4.155144 -0.037355Actual 2008 4.049390 4.049390 -0.025451

Forecast 2009 4.052000 4.052000 0.000676Forecast 2010 4.055000 4.055000 0.000676Forecast 2011 4.058000 4.058000 0.000676

Total Tax = Prevous year * (1 + Growth Rate)GF Tax = Total Tax



Revenue Projection:


A 1987 0.525734 0.525734 Not App.A 1988 0.558292 0.558292 6.19%A 1989 0.570900 0.570900 2.26%A 1990 2.609737 0.602244 5.49%A 1991 2.720146 0.644476 7.01%A 1992 3.339020 1.122195 74.13%A 1993 3.245957 0.999230 -10.96%A 1994 3.091071 0.988376 -1.09%A 1995 3.425943 1.672991 69.27%A 1996 3.373631 3.373631 101.65%A 1997 3.643555 3.643555 8.00%A 1998 3.800656 3.800656 4.31%A 1999 3.758521 3.758521 -1.11%A 2000 4.027557 4.027557 7.16%A 2001 3.980688 3.980688 -1.16%A 2002 4.061733 4.061733 2.04%A 2003 4.109703 4.109703 1.18%A 2004 4.084340 4.084340 -0.62%A 2005 4.292730 4.292730 5.10%A 2006 4.316381 4.316381 0.55%A 2007 4.155144 4.155144 -3.74%A 2008 4.049390 4.049390 -2.55%F 2009 4.052000 4.052000 0.06%F 2010 4.055000 4.055000 0.07%F 2011 4.058000 4.058000 0.07%

Highway Patrol Fines

0

1

1

2

2

3

3

4

4

5

5

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Fiscal Year

Mill

ions

of D

olla

rs

Total General Fund

Data Source(s): Department of Justice, Highway Patrol, SABHRS

Contacts: Department of Justice, Highway Patrol

Legislative Fiscal Division Revenue Estimate Profile Nursing Facilities Fee


Nursing Facilities Fee

Revenue Description: This source consists of two similar utilization fees on nursing homes: 1) nursing facility utilization fee; and 2) intermediate care facility utilization fee. With the enactment of House Bill 749 by the 2005 legislature, qualified nursing facilities are required to pay a nursing facility utilization fee of $8.30 for each bed day in the facility. Nursing facilities are health care facilities licensed by the Department of Public Health and Human Services and include those operated for profit or non-profit, freestanding or part of another health facility, and publicly or privately owned. Specifically included by statute is the Montana Mental Health Nursing Care Center. According to federal definitions, nursing facilities do not include adult foster homes, retirement homes, and other alternative living arrangements. Bed days are defined as a 24-hour period in which a resident of a nursing facility is present in the facility or in which a bed is held for a resident while on temporary leave. An intermediate care facility utilization fee is imposed on resident bed days of intermediate care facilities for the mentally retarded. The only qualifying facility is the Montana Developmental Center. With the enactment of Senate Bill 82 by the 2005 legislature, the fee is six percent of a facility’s quarterly revenue divided by the quarterly bed days.

Statutory Reference: Tax Rate (MCA) – Nursing facility utilization fee (15-60-102), intermediate care facility utilization fee (15-67-102(2)) Tax Distribution (MCA) – Nursing facility utilization fee (15-60-102 & 15-60-210), intermediate care facility utilization fee (15-67-102(3)) Date Due – Nursing facility utilization fee due the last day of the month following the close of the calendar quarter (15-60-201), intermediate care facility utilization fee due the month following the close of the calendar quarter (15-67-201(1))

Applicable Tax Rate(s): 1) Nursing facility utilization fee – $8.30 per bed day; 2) Intermediate care facility utilization fee - 6 percent of a facility’s quarterly revenue divided by the quarterly bed days

Distribution: Nursing facility utilization fee: 1) for fees paid by the Montana Mental Health Nursing Care Center – 30 percent to the general fund and 70 percent to the prevention and stabilization account (for use by the Department of Public Health and Human Services to provide health and human services); 2) for all other facilities - $2.80/bed day to the general fund, and $5.50/bed day to the nursing facility fee account (for use by the Department of Public Health and Human Services to increase the average price paid for Medicaid nursing home services). Intermediate care facility utilization fee: for fees paid by the Montana Developmental Center - 30 percent to the general fund and 70 percent to the prevention and stabilization account. Distribution Chart:

DPHHS Nursing Facility Fee

Account

70%30% $2.80/bed day (~33.73%)

$5.50/bed day(~66.27%)

General FundDPHHS Prevention

& Stabilization Account

General Fund

Nursing Facility Utilization Fee

Intermediate Care Facility Utilization Fee

From the Montana Developmental Center

70%30%

From Other FacilitiesFrom the Montana Mental Health Nursing Care Center




Collection Frequency: Quarterly


Revenue Estimate Methodology: Data To create the nursing facility fees projection, data are obtained from the Department of Revenue (DOR), the Department of Public Health and Human Services (DPHHS), and the state accounting system (SABHRS). DOR provides the number of taxable bed days occupied by clientele of private and state run nursing homes. DPHHS provides counts on the bed days at the Montana Developmental Center (MDC) and total revenues collected, which are used in the calculation of the intermediate care facility fee. SABHRS data provides aggregate historic collections of the nursing facility fees. No adjustments to the raw data are required in the data step for the nursing facility fee analysis. Analysis Nursing facility fees consist of two distinct fees, the nursing facility fee and the intermediate care facility fee. Consequently, two techniques are required to estimate the collection of these fees. The nursing facility fees are estimated using a log model to project future bed days at nursing care facilities. MDC is the only intermediate care facility in Montana and the only facility subject to the intermediate care facility fee. The intermediate facility fee is projected by applying a growth rate to the last year of actual revenue collections at MDC, fiscal 2008. Total nursing fee revenue has increased since fiscal 2003, as a result of fee increases and new fees, but as seen in the figure below the number of taxable bed days at nursing care facilities has declined at the same time. Overall, taxable bed days have been in decline since the fee was imposed in the mid 1990’s. Consequently, taxable nursing facility bed days are projected with a log model which smoothes the excessive variability in the data for the purpose of measurement. To obtain the projection for nursing facility fees, the following equation is employed:

Projected Nursing Facility Fees = TBDNCF * NFFR Where: TBDNCF = Taxable Bed Days, Nursing Care Facilities NFFR = Nursing Facility Fee Rate

Nursing Facility Bed Days and Tax Rate (millions)

0.00

0.50

1.00

1.50

2.00

2.50

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

F20

10F20

11F

Fiscal Year

Bed

Day

s

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

Tax

Rat

e

Bed Days Forecast Bed Days Tax Rate

The statistics of fit show that a logarithmic curve accurately measures the rate of growth in the number of taxable nursing facility bed days in Montana. The model has an R2 rating of 0.957. This means that the linear trend explains 95.7 percent of the variability of the number of taxable nursing facility bed days in Montana, when all other impacts are held constant.* The model



projects compound growth of approximately -5.1 percent per fiscal year resulting in bed day projections of 1.81 million, 1.77 million, and 1.73 million in fiscal 2009 through fiscal 2011, respectively. By applying the current fee of $8.30 to the projected taxable bed days, the resulting projections are $15.0 million, $14.7 million, and $14.3 million in fiscal 2009 through fiscal 2011, respectively. The intermediate care facility fee is assessed against the per-bed day receipts of the facility. Because the intermediate care facility fee is a relatively new fee, there is only a limited amount of data to use in the projection of future fee collections. As a result, the fee is projected by applying the rate of growth in the revenues previous year of actual collection. The rate of revenue growth at MDC between fiscal year 2008 was 1.5 percent. In applying that rate of growth to the fiscal 2008 base, projections equal $15.1 million in fiscal 2009, $15.3 million in fiscal 2010, and $15.5 million in fiscal 2011. Next, the tax is applied to the estimate of total intermediate care facility bed day receipts. Finally, the fiscal year projections then are summed to provide the total nursing facility fees estimates. The resulting estimates are $15.9 million in fiscal 2009, $15.6 million in fiscal 2010, and $15.3 million in fiscal 2011. *For additional information concerning the statistics of fit for the model used for this projection, contact the Legislative Fiscal Division.

Forecast Methodology:

All Nursing Facility Fee

Revenue

xBed Days for All Facilities Fee

Intermediate Care Facility Utilization Fee


xMontana Developmental Center Revenue

Fee

+

+


Nursing Intermediate Intermediate MMHNCCt Total Tax GF Tax Facilities Bed Care Care Tax

Fiscal Millions Millions Fee Days Rate Revenue Millions

Actual 2000 6.054947 6.054947 2.800000 2.113805Actual 2001 5.655978 5.655978 2.800000 2.083501Actual 2002 5.918173 5.918173 2.800000 2.072696Actual 2003 6.178135 5.859870 2.800000 2.052202 5.0000% 11.131460Actual 2004 10.021866 5.915841 4.500000 2.043377 5.0000% 17.260720Actual 2005 11.602112 5.911586 5.300000 1.979893 5.0000% 16.438460Actual 2006 14.649976 5.711693 7.050000 1.924611 6.0000% 14.953783Actual 2007 17.073592 5.716794 8.300000 1.901236 6.0000% 14.624700Actual 2008 16.758718 5.610098 8.300000 1.803945 6.0000% 14.844850 0.251864

Forecast 2009 15.891000 5.318000 8.300000 1.805700 6.0000% 15.068073 0.250204Forecast 2010 15.583000 5.213000 8.300000 1.767000 6.0000% 15.294766 0.250204Forecast 2011 15.276000 5.109000 8.300000 1.728300 6.0000% 15.524870 0.250204

Total Tax = Nursing Facilities * Bed + Intermediate Care Rate * Intermediate Care RevenueGF Tax = MMHNCC * 30% + (Nursing Fee * Bed Days - MMHNCC) * $2.80/$8.30 +

Care Revenue * Care Rate * 30%



Revenue Projection:


A 1987 0.000000 0.000000 Not App.A 1988 0.000000 0.000000 Not App.A 1989 0.000000 0.000000 Not App.A 1990 0.000000 0.000000 Not App.A 1991 0.000000 0.000000 Not App.A 1992 1.587432 1.587432 Not App.A 1993 3.131331 3.131331 97.26%A 1994 4.739832 0.000000 -100.00%A 1995 6.364377 0.000000 Not App.A 1996 6.579620 6.579620 Not App.A 1997 6.572123 6.572123 -0.11%A 1998 6.200413 6.200413 -5.66%A 1999 5.713357 5.713357 -7.86%A 2000 6.054947 6.054947 5.98%A 2001 5.655978 5.655978 -6.59%A 2002 5.918173 5.918173 4.64%A 2003 6.178135 5.859870 -0.99%A 2004 10.021866 5.915841 0.96%A 2005 11.602112 5.911586 -0.07%A 2006 14.649976 5.711693 -3.38%A 2007 17.073592 5.716794 0.09%A 2008 16.758718 5.610098 -1.87%F 2009 15.891000 5.318000 -5.21%F 2010 15.583000 5.213000 -1.97%F 2011 15.276000 5.109000 -2.00%

Nursing Facilities Fee

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Fiscal Year

Mill

ions

of D

olla

rs

Total General Fund

Data Source(s): Department of Public Health and Human Services, Nursing Facilities

Contacts: Department of Public Health and Human Services


Public Institution Reimbursements



Revenue Description: The Department of Public Health and Human Services receives reimbursement for the cost of sheltering and treating residents at the Montana Developmental Center (MDC), the Montana Mental Health Nursing Care Center (MMHNCC), Montana State Hospital (MSH), Montana Chemical Dependency Treatment Center (MCDC), and the Montana Veterans' Home (MVH). There are four sources of reimbursement income: 1) state and federally matched Medicaid monies; 2) insurance proceeds from companies with whom the resident is insured; 3) payments by residents or persons legally responsible for them; and 4) federal Medicare funds. Most of the reimbursements come from federal Medicaid payments. Three variables determine the level of Medicaid nursing home payments: 1) the number of patient days eligible for Medicaid reimbursement; 2) the reimbursement rate per patient day; and 3) the private resources of Medicaid patients.

Statutory Reference: Tax Rate (MCA) – 53-1-402 (requirement to pay)

Tax Distribution (MCA) – 53-1-413 Date Due – monthly (53-1-405(3)

Applicable Tax Rate(s): N/A

Distribution: Revenue collected from the above sources is deposited in the general fund with the following exceptions: 1. Reimbursements from MDC and MSH are first used to pay debt service on bonds issued to fund construction at these

facilities. The remainder is deposited into the general fund. 2. Reimbursements received for the Veterans' Home and Montana Chemical Dependency Treatment Center are deposited

into a state special revenue account and appropriated to the institutions. Distribution Chart:

General Fund

100%

Collection Frequency: Monthly


Revenue Estimate Methodology: Data Data are collected from the Department of Public Health and Human Services (DPHHS) and the state accounting system (SABHRS) to develop the estimate for the public institution reimbursements. In addition to residency data, DPHHS provides the data used to develop relationships of payment patterns of individuals and insurance companies to the federal government reimbursements (Medicaid and Medicare). DPHHS also provides estimates on future Federal Medical Assistance Percentage (FMAP) rates. SABHRS provides historical data used to assess the accuracy of the estimates.




Analysis The largest component of Montana’s institutional reimbursements is Medicaid, as seen in the figure below. Medicaid and Medicare payments are responsible for most of the variability in reimbursement collections. Consequently, the variability can in large part be attributed to the changes in the FMAP rates for the state. The FMAP rates are set annually based on the state’s relative per capita income. States like Montana, with a relatively low per capita income and a higher FMAP rate, receive more federal assistance than states with a higher per capita income. If the state per capita income rises in relation to other states, the FMAP rate and federal reimbursements will decline. In the 2011 biennium, the FMAP is expected to decline from approximately 68.6 percent in fiscal 2008 to 67.1 percent in fiscal 2011. Most of the Medicare payments result from billings at Montana State Hospital (MSH), while most Medicaid payments are generated through care at the Montana Mental Health Care Center (MMHCC).

Gross Institutional Reimbursementsby payment type

$0.0$2.0$4.0$6.0$8.0

$10.0$12.0$14.0$16.0$18.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009F

2010F

2011F

Mill

ions

Adjustments Medicare Part D Insurance Private Medicare Medicaid

Estimates for institutional reimbursements are derived using average daily population (ADP) estimates and reimbursement rates provided by DPHHS for three state hospitals: the Montana Dependency Center (MDC), MMHCC, and MSH. Both the ADP and the facility rates are estimated with expected growth percentages. The ADP is adjusted by Medicare and Medicaid eligibility rates, as determined by DPHHS. The FMAP rate, provided to DPHHS in terms of federal fiscal year, is adjusted for the state fiscal year. The equation for calculating the reimbursements for each facility follows: Reimbursements=(ADPI*RateI)+(ADPP*RateP)+(ADPMR*EligMR*RateMR*FMAP)+(ADPMD*EligMD*RateMD*FMAPMD) Where: ADP = Average Daily Population I = Insurance P = Private MR = Medicare MD = Medicaid ELIG = Eligibility Rate FMAP = Federal Medical Percentage According to DPHHS, bed days are expected to remain relatively constant at MDC and MMHNCC. Bed days at MSH are expected to decline from the “over capacity” number of bed days charged in fiscal 2008. The state fiscal year FMAP rates are expected to be 68.2 percent, 67.4 percent, and 67.0 percent in fiscal years 2009 through 2011, respectively. Private rates and insurance rates are expected to grow slowly over the biennium at all three facilities. The estimates for total private payments are estimated to be $2.0 million, $2.1 million, and $2.2 million for fiscal years 2009 through 2011, respectively. The estimates for insurance payments are $379,187; $386,450; and $393,819 for fiscal 2009 through fiscal 2011. Medicaid payments are expected to be $11.2 million, $11.7 million, and $11.7 million through the three years of this analysis. Medicare payments are estimated to average $2.6 million per year over the three-year period. New since FY 2006 are Medicare Part D reimbursements to MMHCC. Medicare Part D is reimbursed at an average rate of $45.00/eligible bed day, and the reimbursements are estimated to be approximately $518,000 annually. The final step in creating the reimbursement estimate is to combine the estimates by payment type estimates. When combined, the estimate for gross reimbursements is $16.6 million in fiscal 2009, $17.3 million in fiscal 2010, and $17.6 million in fiscal 2011.




Adjustment and Distribution Two adjustments are required to complete the estimates for institutional reimbursements. Gross reimbursements must be reduced by two debt service payments in each fiscal year. The debt service is the result of bonds issued for the purpose of facility upgrades. After subtracting the debt service reimbursement collections are $13.7 million in fiscal 2009, $14.4 million in fiscal 2010, and $14.7 million in fiscal 2011.


Total Public Institution

Reimbursements Revenue

+Medicaid Payments

Private Payments

-

Insurance Payments

Building Debt Service

Payments

+

Medicare Payments

+


t Total Rev. GF Rev. Private Insurance Medicaid MedicareFiscal Millions Millions Millions Millions Millions Millions

Actual 2000 11.345440 11.345440 0.512403 0.000257 12.490967 0.003044Actual 2001 13.553585 13.553585 0.649965 0.000498 12.887899 0.015223Actual 2002 14.282894 14.282894 1.483431 0.317047 10.994744 1.487671Actual 2003 13.042526 13.042526 1.564208 0.451974 9.900342 1.126001Actual 2004 18.110443 18.110443 1.424453 0.311203 14.336601 2.038187Actual 2005 12.508688 12.508688 1.887627 0.556631 12.631385 0.210973Actual 2006 12.727569 12.727569 1.534775 0.283624 9.531139 1.273948Actual 2007 10.669017 10.669017 1.850027 0.187443 7.472999 0.867377Actual 2008 15.334683 15.334683 1.646587 0.345821 9.391640 3.455721

Forecast 2009 13.658000 13.658000 2.047661 0.379187 11.201955 2.459248Forecast 2010 14.412000 14.412000 2.132988 0.386450 11.690758 2.612300Forecast 2011 14.675000 14.675000 2.217876 0.393819 11.671082 2.781055

Medicaret MDC Debt MSH Debt Adjustments Part D

Fiscal Millions Millions Millions Millions

Actual 2000 0.965496 0.000000Actual 2001 1.079220 1.909252 0.000000Actual 2002 1.075405 1.911032 0.000000Actual 2003 1.045873 1.776461 -1.572893Actual 2004 0.868888 1.752261 -3.180119Actual 2005 1.005833 1.785072 0.012977Actual 2006 0.950665 1.775375 0.000000 0.104083Actual 2007 0.958509 1.792631 0.000000 0.291171Actual 2008 0.982030 1.796631 0.000000 0.494915

Forecast 2009 1.016810 1.909688 0.000000 0.496479Forecast 2010 1.015060 1.912885 0.000000 0.517828Forecast 2011 1.015788 1.912643 0.000000 0.540094

Total Rev. = Private = Insurance + Medicaid + Medicare - MDC Debt - MSH Debt + Adjustments + Medicare Part DGF Rev. = Total Rev.




Revenue Projection:


A 1987 14.215767 14.215767 Not App.A 1988 15.395310 15.395310 8.30%A 1989 16.031423 16.031423 4.13%A 1990 12.284668 12.284668 -23.37%A 1991 14.140931 14.140931 15.11%A 1992 16.329459 16.329459 15.48%A 1993 14.486422 14.486422 -11.29%A 1994 15.414542 15.414542 6.41%A 1995 16.455809 16.455809 6.76%A 1996 16.141901 16.141901 -1.91%A 1997 11.158482 11.158482 -30.87%A 1998 10.335336 10.335336 -7.38%A 1999 11.135977 11.135977 7.75%A 2000 11.345440 11.345440 1.88%A 2001 13.553585 13.553585 19.46%A 2002 14.282894 14.282894 5.38%A 2003 13.042526 13.042526 -8.68%A 2004 18.110443 18.110443 38.86%A 2005 12.508688 12.508688 -30.93%A 2006 12.727569 12.727569 1.75%A 2007 10.669017 10.669017 -16.17%A 2008 15.334683 15.334683 43.73%F 2009 13.658000 13.658000 -10.93%F 2010 14.412000 14.412000 5.52%F 2011 14.675000 14.675000 1.82%


0

2

4

6

8

10

12

14

16

18

20

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Fiscal Year

Mill

ions

of D

olla

rs

Total General Fund

Data Source(s): SABHRS, Department of Public Health and Human Services

Contacts: Department of Public Health and Human Services

Legislative Fiscal Division Revenue Estimate Profile Tobacco Settlement


Tobacco Settlement

Revenue Description: Montana receives revenue as a settling party to a Master Settlement Agreement (MSA) with four original tobacco companies and 56 subsequent companies to end a four-year legal battle with 46 states, Puerto Rico, American Samoa, the U.S. Virgin Islands, the North Mariana Island, Guam and the District of Columbia (52 total settling entities). Montana is eligible for four types of payments: 1) reimbursement for legal costs (received December 1999); 2) five initial payments (Two were received in fiscal 2000 and one each year was received in fiscal years 2001, 2002, and 2003); 3) on-going, perpetual annual payments; and 4) strategic contribution payments (from fiscal years 2008 through 2017). The MSA places no restrictions on how the settling parties spend the money. The total amount of tobacco settlement funds available to Montana is affected by a number of adjustments. These may include inflation, sales volume changes, non-participating manufacturers (NPM) adjustment for the loss of market shares, operating income of the original four tobacco companies, number and operating income of subsequent participating manufactures, number of states reaching state specific finality, settlements reached by the four states not party to the agreement (Florida, Texas, Minnesota, and Mississippi), litigation offsets, disputed payments, and federal tobacco legislation offsets among others. The reduction for the NPM adjustment was first included in the revenue estimates beginning fiscal 2006. Amounts paid by manufacturers who participate in the MSA may decrease if they have lost market shares and it is proven that a significant portion of the loss (to companies not participating in the MSA) is due to the disadvantages caused by the MSA. An economics firm must determine if this is the case. The adjustment does not apply if a state has enacted “model statutes” and enforced them. Although it has not yet been determined if all these conditions have been met, it is expected that participating manufactures will withhold a portion of their payments in disputed escrow accounts until the matter is resolved, thus reducing payments to the settling entities.

Statutory Reference: Tax Rate – NA

Tax Distribution (MCA) – Montana Constitution, Article X11, Section 4; 17-6-606; 53-4-1011 Date Due – annual payments from settling entities due April 15th (Master Settlement Agreement, Chapter IX(c)), General Tobacco annual payments through calendar 2016 due August 30th (General Tobacco Adherence Agreement)

Applicable Tax Rate(s): NA

Distribution: Due to passage of Constitutional Amendment 35 by the electorate in November 2000, the legislature is required to dedicate no less than 40 percent of tobacco settlement money to a permanent trust fund. Since the legislature has not yet determined the exact percentage to be deposited to the trust fund, the revenue estimate assumes 40 percent. For fiscal 2003, the remaining 60 percent of the money was deposited to the general fund. Due to passage of Initiative 146 by the electorate in November 2002, beginning fiscal 2004, 32 percent of the tobacco settlement money funds tobacco prevention programs and 17 percent of the funds is used for the Children’s Health Insurance Program. In HB 743, the 2007 Legislature added chronic disease programs to the allowable uses of the 32 percent distribution. The remaining 11 percent of the money is deposited to the general fund.



Distribution Chart:

Tobacco Prevention

32%

CHIP17%

Tobacco Trust40%

General Fund11%

Collection Frequency: For fiscal 2003: The last initial payment is expected January 10, 2003 and the annual payment is expected April 15th 2003. Beginning fiscal 2004: Annual payments are expected each April 15th into perpetuity. General Tobacco, a new subsequent participating manufacturer, is required to make annual payments every August 30th through calendar 2016 for obligations incurred from 2000 to 2003.

% of Total General Fund Revenue: FY 2004 - 0.21% FY 2007 - 0.16% FY 2005 - 0.19% FY 2008 - 0.19% FY 2006 - 0.16%

Revenue Estimate Methodology: The derivation of the tobacco settlement revenue estimate involves many factors. The Master Settlement Agreement specifies base amounts to be paid by all participating manufacturers, but also allows various adjustments to be made to these payments. Data The Master Settlement Agreement, signed by the settling entities and participating tobacco manufacturers (PM), is the driving document for the procedure to use in determining how much the original participating manufacturers (OPM) to the agreement and the subsequent participating manufacturers (SPM) have to pay to the settling entities. PriceWaterhouseCoopers, the independent auditor to the agreement, gathers all the data and makes all the calculations required by the Master Settlement Agreement for determining what the PM owe. Documents produced by PriceWaterhouseCoopers provide the historic data needed to project future payments. Staff at the Montana Attorney General’s office and sometimes the National Association of Attorneys General are also consulted. Since an adjustment for a change in volume of cigarettes shipped is necessary, various knowledgeable sources are consulted as to expected changes in smoking or the sale of cigarettes. Payments Currently, there are two types of payments from OPM: 1. On-going annual payments to be received April 15th each year of which Montana receives 0.4247591 percent. These

payments are to be made in perpetuity and increased in FY 2008; and 2. Strategic contribution payments are to be made from FY 2008 through FY 2017 of which Montana receives 1.0447501

percent. The table below shows the total of these payments available to all settling entities before any adjustments.



Total Amounts from OPM

$0$1,000$2,000$3,000$4,000$5,000$6,000$7,000$8,000$9,000

$10,000

20002001

20022003

20042005

2006 20072008

2009F2010F

2011F

Fiscal Year

Mill

ions

Annual Payment Strategic Contribution

Manufacturers who subsequently participate in the agreement also make payments based on the total annual and strategic contribution payments required by the OPM. The amount of these payments is also subject to various adjustments. Adjustments There are five potential adjustments to the payments. 1. Inflation – This adjustment increases the amount owed by PM. The set amounts of the annual and the strategic contribution

payments are increased by the greater of 3.0 percent or the amount of the Consumer Price Index for Urban Consumers. The effect is cumulative so that the previous year’s inflation percentage is increased by the current year’s amount plus the amount of the current year’s percentage. The chart shows the annual and cumulative inflation factors.

Inflation Adjustment Percentages

2%

7%

12%

17%

2000 2001 2002

2003 2004 2005200

62007 2008

2009F

2010F

2011F

Fiscal Year

Cum

mul

ativ

e

0%5%10%15%20%25%30%35%40%45%50%

Annu

al

Annual Percentage Cumulative Percentage

2. Volume – As the number of cigarettes shipped nationally decreases, payments by PM are reduced. The current number of

cigarettes is compared to the 1997 base number of 475.656 billion cigarettes. A proxy for the estimated annual change in the number of cigarettes shipped is determined by developing an estimate for the percentage change in cigarette consumption. For this analysis, the trend (downward) of the number of cigarette shipped from FY 2004 to FY 2008 was applied to the FY 2008 base year and each subsequent year. Like the inflation adjustment, the effect is cumulative so that the previous year’s percentage adjustment is increased by the current year’s amount plus the amount of the current year’s percentage. According to the settlement agreement, the cumulative percentage is then reduced by 2 percent. The chart shows the annual and adjusted cumulative volume factors.



Volume Adjustment Percentages

-40%-35%-30%-25%-20%-15%-10%-5%0%

20002001

20022003

20042005

2006 20072008

2009F2010F

2011FFiscal Year

Cum

mul

ativ

e

-40%

-35%-30%-25%-20%-15%-10%-5%

0%

Annu

al

Annual Percentage Cumulative Percentage

3. Operating income – If the aggregate operating income from the OPM sales of cigarettes exceeds the 1996 base amount of

$7,060.840 million, as adjusted for inflation (see above) and by the percentage of states who have finalized acceptance of the agreement (100 percent since calendar 2001), then the dollar amount of the volume reduction is reduced and the amount of OPM payments increases. This adjustment has not been applied since calendar 2000.

4. Previous settling states – Previous to the Master Settlement Agreement, four states had settled lawsuits with certain cigarette manufacturers. The agreement recognized this by allowing reductions to the OPM annual payments (as adjusted for inflation and volume) of 12.45 percent through the FY 2007 payment, 12.24 percent through the FY 2017 payment, and 11.07 percent thereafter.

5. Non-participating manufacturers (NPM) – If tobacco manufacturers who participate in the Master Settlement Agreement lose market share to those manufacturers who do not, their payments may be reduced. It must be shown that there was a loss of market share to NPM and that the disadvantages caused by the agreement were a significant factor contributing to the loss. However, the NPM adjustment does not apply to a state that had a “qualifying statute” in effect for the full year in question and had diligently enforced it. The “qualifying statute” requires a manufacturer who is not a PM to pay into a state-specific escrow account $0.0167539 per cigarette sold in that state in CY 2006 and $0.0188482 thereafter. Money in the account may be used to pay a judgment or settlement against the manufacturer. The Montana legislature enacted SB 359 (1999 session) and HB 663 (2003 session) in response to the agreement (see Title 15, Chapter 11, Parts 4 and 5). Although the agreement’s independent auditor calculates the NPM adjustment, it has never applied it to required payments.

The NPM adjustment is three times the market share loss of PM. Market share loss is determined by subtracting the current year market share of PM from the 1997 base market share of 99.5835 percent less 2.0 percentage points or 97.5835 percent. This percentage difference is multiplied by the annual payment amount adjusted for inflation, volume, and previous settling states. If the computed market share loss exceeds 16-2/3 percent, the formula changes to reduce the percentage adjustment. For this to occur, the change in market share for all PM would have to fall to 80 percent. It is unlikely that this will occur. Based on this formula, the NPM adjustment could reduce Montana’s payments by a maximum of $3.7 million in FY 2009, $3.8 million in FY 2010 and $3.9 million in FY 2011, if all the conditions were met. The estimates include a portion of these reductions; not because all the conditions have been met, but because the PM may dispute a portion of a payment. Many PM feel the adjustment should be applied and have subsequently deposited disputed amounts into special escrow accounts until the issue is resolved. However, not all companies dispute the full amount, so the revenue estimate reduces the maximum amount that could be disputed by the same percentage that occurred in the previous year. The end result for the settling entities is that some portion of the money is unavailable even though the adjustment was not applied to the payments. This occurred in the FY 2006 payment when $3.5 million was withheld from Montana’s payment. In FY 2007, $3.0 million was withheld and $2.3 million was withheld in FY 2008. It is anticipated that PM will continue to dispute a portion of future payments.



Analysis Once adjustments amounts have been calculated, the applicable adjustments to the OPM and SMP payments can be applied and other revenue components calculated. OPM Annual Payment - The estimate for tobacco settlement revenue from OPM is derived by first multiplying the payment amount by 1 plus the cumulative percentages for the inflation and volume adjustments and the previous settled states’ percentage then adding the dollar amount of the operating income adjustment (zero) and the NPM adjustment. To this total amount, Montana’s allocation of 0.4247591 percent is applied. SPM Annual Payment - The estimate for tobacco settlement revenue from SPM is derived by a five-step process:

1. The volume adjustment (a reduction) is calculated by multiplying the annual OPM amount by the cumulative volume percentage.

2. A market share adjustment (a reduction to the amount owed) is calculated by: a) subtracting the volume adjustment, derived above, from the OPM amount; b) multiplying the result by a market share proxy to derive the base amount owed; c) the inflation adjustment is applied by multiplying the annual OPM amount by the cumulative inflation percentage; and d) the inflation adjustment is added to the base amount owed.

3. The proxy is calculated in the last completed year by dividing the SPM adjusted base payment (adjust for volume) by the total known amount due after adjustments for market share changes. The proxy from the last known fiscal year is used in all subsequent years.

4. The NPM maximum adjustment (a possible reduction), as determined above, is calculated. Since not all companies will dispute the entire amount, a percentage is applied to reduce the reduction. For FY 2008, this percentage was 61.6 percent and is used in all subsequent years.

5. The total SPM amount is adjusted by the above three adjustments and multiplied by 0.4247591 percent to obtain Montana’s share.

OPM Strategic Contribution Payment – From FY 2008 through FY 2017, the OPM owe yearly strategic contribution payments to the settling entities in the amount of $861,000,000. This amount is increased by the inflation adjustment and decreased by the volume adjustment, both described above. The result is multiplied by Montana’s share of 1.0447501 percent. SPM Strategic Contribution Payment – From FY 2008 through FY 2017, the SPM owe yearly strategic contribution payments to the settling entities based on the OPM amount of $861,000,000. This amount is increased by the inflation adjustment, decreased by the market share adjustment, and decreased by the volume adjustment, all described above. The result is multiplied by Montana’s share of 1.0447501 percent. General Tobacco – The General Tobacco Company joined the Master Settlement Agreement in August 2004 and will make future payments the same as the other SPM. However, the company entered into a separate agreement with the settling entities for making the required payments owed retroactively from the date of its joining to the date the Master Settlement Agreement was signed. These obligations total $272.3 million. This “principal” amount will be paid yearly over a 12-year period based on a percentage schedule based on the year. For fiscal years 2008 and 2009, the percentage of the “principal” to be paid is three percent and five percent, respectively. Interest on unpaid balances at five percent is then added to the “principal” payment. Once the total annual payment is calculated, it is multiplied by 0.4247591 percent to obtain Montana’s share.

Adjustments and Distribution Once total tax revenue for each fiscal year is determined, the applicable distribution percentages are applied.

General Tobacco "Principal Payments"

0%2%4%6%8%

10%12%14%16%18%

2006 20072008

2009F2010F

2011F2012

2013F2012

F2013F2014

F2015

Fiscal Year

Porti

on o

f "Pr

inci

pal"

Annual Percentage




Montana’s Share of General

Tobacco Payment

Participating Manufacturers’

Annual Payment

Total Tobacco Settlement Revenue

+

Montana’sPercentage

Share.4247291%

x

Inflation Adjustment + Operating Income

Adjustment

Subsequent Manufacturers’

Annual Payment

Previous Settled States Adjustment

Independent Auditor

Adjustments


Share

Inflated Prior Year Operating Income - Inflated 1996 Base

of $7,195,340,000 x 0.25 x State Specific Finality Percentage

Total Annual Payment Available + Volume

Adjustment x Market Share Proxy–FY 2008

Cummulative Inflation

+

Applicable Principal

PercentagexPrincipal

Accrued Interest

General Tobacco Payment x+

+

+

Volume Adjustment

SPM Strategic Contribution

Payment

Inflation Adjustment+-

From Fiscal 2008-2017

Volume, Inflation,PSS Adjustments

OPM AnnualPayment


Share1.0447501%


Annual Payment

+ x1997 Base

Market Share

-Current Market Share

x 3

Volume, Inflation, PSS Adjustments+

x

x1997 Base

Market Share

-Current Market Share

x 3


Share.4247291%

NPM Adjustment(Negative)

+

NPM Adjustment

Factorx

Volume Adjustment

OPM Strategic Contribution

Payment

Inflation Adjustment+-

xFrom Fiscal 2008-2017


Strategic Payment

OPM StrageticPayment

xMontana’sPercentage

Share1.0447501%

NPM Adjustment(Negative)

NPM Adjustment

Factorx



Revenue Estimate Assumptions: Initial Annual Annual PSS

t Total Settle GF Settle Payment Payment Share Reduction GF AllocationFiscal Millions Millions Millions Millions Percent Percent Percent

Actual 2000 34.804411 34.804411 4872.000000 4500.000000 0.004247591 -0.124500000 1.000000Actual 2001 26.639851 15.989101 2546.160000 5000.000000 0.004247591 -0.124500000 0.600195Actual 2002 31.079018 18.647411 2622.544800 6500.000000 0.004247591 -0.124500000 0.600000Actual 2003 31.166018 18.699611 2701.221144 6500.000000 0.004247591 -0.124500000 0.600000Actual 2004 26.672072 2.933928 0.000000 8000.000000 0.004247591 -0.124500000 0.110000Actual 2005 27.070703 2.977777 0.000000 8000.000000 0.004247591 -0.124500000 0.110000Actual 2006 24.851033 2.733614 0.000000 8000.000000 0.004247591 -0.124500000 0.110000Actual 2007 25.931124 2.861266 0.000000 8000.000000 0.004247591 -0.124500000 0.110341Actual 2008 34.614275 3.807570 0.000000 8139.000000 0.004247591 -0.122373756 0.110000

Forecast 2009 35.982000 3.958000 0.000000 8139.000000 0.004247591 -0.122373756 0.110000Forecast 2010 36.449000 4.009000 0.000000 8139.000000 0.004247591 -0.122373756 0.110000Forecast 2011 37.032000 4.074000 0.000000 8139.000000 0.004247591 -0.122373756 0.110000

Annual Cummulative Adjustment Adjusted Annual Cummulative NPM Adj.t Vol. Change Vol. Change Factor Vol. Change CPI Change CPI Change Factor

Fiscal Percent Percent Percent Percent Percent Percent Percent

Actual 2000 -0.140094943 -0.140094943 0.980000000 -0.137293044 0.030000000 0.030000000Actual 2001 -0.015542065 -0.153459643 0.980000000 -0.150390450 0.033868093 0.064884100Actual 2002 -0.045780332 -0.192214542 0.980000000 -0.188370251 0.030000000 0.096830600Actual 2003 -0.049400356 -0.232119431 0.980000000 -0.227477042 0.030000000 0.129735500Actual 2004 -0.056361859 -0.275398607 0.980000000 -0.269890635 0.030000000 0.163627600Actual 2005 -0.016096976 -0.287062498 0.980000000 -0.281321248 0.032555600 0.201510200Actual 2006 -0.020662729 -0.301793732 0.980000000 -0.295757857 0.034156600 0.242549700Actual 2007 -0.015004246 -0.312269791 0.980000000 -0.306024395 0.030000000 0.279826200Actual 2008 -0.044973909 -0.343199707 0.980000000 -0.336335713 0.040812700 0.332059400 0.616260

Forecast 2009 -0.013684537 -0.352187715 0.980000000 -0.345143961 0.038591000 0.383464900 0.616260Forecast 2010 -0.024823471 -0.368268664 0.980000000 -0.360903291 0.030000000 0.424968800 0.616260Forecast 2011 -0.025455361 -0.384349613 0.980000000 -0.376662621 0.030000000 0.467717900 0.616260

Op. Income SPM General NPM Strategic Strategic SPMt Adjustment Payment Tobacco Adjustment Payment Share Strat. Pay.

Fiscal Millions Millions Millions Millions Millions Percent Millions

Actual 2000 40.787986 45.670546 0.000000 0.000000000Actual 2001 64.221594 82.400165 0.000000 0.000000000Actual 2002 0.000000 144.417782 0.000000 0.000000000Actual 2003 0.000000 240.733198 0.000000 0.000000000Actual 2004 0.000000 293.806967 0.000000 0.000000000Actual 2005 0.000000 433.300079 0.000000 0.000000000Actual 2006 0.000000 441.940333 0.072141 -3.006038 0.000000 0.000000000Actual 2007 0.000000 531.992827 0.080386 -2.596975 0.000000 0.000000000 34.165664Actual 2008 0.000000 430.210578 0.090796 -3.622289 861.000000 0.010447501 45.510694

Forecast 2009 0.000000 440.882669 0.112194 -3.728806 861.000000 0.010447501 62.962448Forecast 2010 0.000000 443.180845 0.132435 -3.775218 861.000000 0.010447501 89.719524Forecast 2011 0.000000 445.220144 0.139953 -3.835000 861.000000 0.010447501 131.682951

Total Settle = (Annual Payment * ((1+ Cumulative CPI Change) * (1+ Adjusted Vol. Change) * (1+ PSS Reduction))+ Op. Income Adjustment) * Annual Share + General Tobacco + (SPM Payment * Annual Share)+ (NPM Adjustment * NPM Adjustment Factor)+ Strategic Payment * ((1+ Cumulative CPI Change) * (1+ Adjusted Vol. Change) + SPM Strategic Payment)



Revenue Projection:

Data Source(s): Master Settlement Agreement (as amended), Center for Disease Control and Prevention, National Council of State Legislatures, National Association of Attorneys General, Tobacco companies’ 10Q report

Contacts: Department of Justice


A 1987 0.000000 0.000000 Not App.A 1988 0.000000 0.000000 Not App.A 1989 0.000000 0.000000 Not App.A 1990 0.000000 0.000000 Not App.A 1991 0.000000 0.000000 Not App.A 1992 0.000000 0.000000 Not App.A 1993 0.000000 0.000000 Not App.A 1994 0.000000 0.000000 Not App.A 1995 0.000000 0.000000 Not App.A 1996 0.000000 0.000000 Not App.A 1997 0.000000 0.000000 Not App.A 1998 0.000000 0.000000 Not App.A 1999 0.000000 0.000000 Not App.A 2000 34.804411 34.804411 Not App.A 2001 26.639851 15.989101 -54.06%A 2002 31.079018 18.647411 16.63%A 2003 31.166018 18.699611 0.28%A 2004 26.672072 2.933928 -84.31%A 2005 27.070703 2.977777 1.49%A 2006 24.851033 2.733614 -8.20%A 2007 25.931124 2.861266 4.67%A 2008 34.614275 3.807570 33.07%F 2009 35.982000 3.958000 3.95%F 2010 36.449000 4.009000 1.29%F 2011 37.032000 4.074000 1.62%

Tobacco Settlement

0

5

10

15

20

25

30

35

40

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Fiscal Year

Mill

ions

of D

olla

rs

Total General Fund